UK financial services
The FS industry is vital to the UK economy. In the year to March 2017:
• UK FS contributed an estimated £72.1bn to the Exchequer – 11% of UK tax receipts
• Provides over 3% of jobs (for 1.1 million people across the country)
• 7% of output
• 11% of taxes
The risk factor one year on
The difficult and protracted nature of the Brexit negotiations has taken its toll on the FS sector. Almost half (49%) the representatives of the FS firms surveyed stated that the risks posed by Brexit today are greater than the opportunities; just 14% believe the opposite.
That negative imbalance has increased markedly since last year, when fewer believed risks exceeded opportunities (40%), and more believed the reverse (16%).
Nonetheless, some firms seem to view Brexit as a short-term headwind instead of a long-term, systemic threat.
One-third (33%) expect that in five years' time the opportunities presented by Brexit will be greater than the risks – finally outnumbering the 32% that expect the opposite.
A look at sub-sectors
FS is a diverse industry, comprising businesses with very different characteristics and considerations.
Retail banking
In line with last year's report, many retail banks are still concerned that communication from government and regulators about their proposed approach to Brexit is insufficient or unclear.
Corporate banking
Corporate banks are particularly concerned that a no-deal Brexit or leaving the EU without a transition agreement would damage their businesses.
Investment banking
Investment banks' biggest concerns about Brexit centre on market access: how will they be able to make cross border transfers once the UK has left the EU? And to what extent will they be forced to set up new subsidiaries in key markets, or at least increase their presence on the ground?
Asset management
Many asset managers have built significant retail and institutional funds businesses throughout the EU, so they do not want any Brexit outcome that makesit more difficult to operate and develop these businesses.
Fintech
Significantly more fintech companies than those in other sectors say that Brexit will present more risks than opportunities than vice versa, even in five years' time.
Prepare, prepare, prepare
With March 2019 just a year away, the race is on to secure a favourable Brexit outcome for FS.
Resolving the uncertainties of policy and implementation will help firms across the industry plan more effectively for a post-Brexit environment.
The challenge is great, but firms that prepare for and rise to it till be well placed to continue prospering – and to maintain the world-leading status of the UK’s FS industry.
